Question 1

A micro-assessment of country risk involves consideration of all variables that affect country risk except for those unique to a particular firm or industry.

Accepted Answer

A) True 
 B)False

Question 2

___________ is not a political risk factor.

Accepted Answer

A)  High interest rates in a foreign country 
B)  Currency inconvertibility 
C)  War 
D)  Corruption 
A)  High interest rates in a foreign country 
B)  Currency inconvertibility 
C)  War 
D)  Corruption

Question 3

As a result of the 2003 war in Iraq,some MNCs feared that oil prices would ______ and that U.S.inflation and interest rates would _______.

Accepted Answer

A)  rise;rise 
B)  fall;fall 
C)  rise;fall 
D)  fall;rise 
A)  rise;rise 
B)  fall;fall 
C)  rise;fall 
D)  fall;rise

Question 4

A __________ currency may ________ the volume of products imported by the country and therefore reduce the country's production and national income.

Accepted Answer

A)  weak;increase 
B)  weak;reduce 
C)  strong;increase 
D)  strong;reduce 
A)  weak;increase 
B)  weak;reduce 
C)  strong;increase 
D)  strong;reduce

Question 5

Which of the following is not a technique to assess country risk

Accepted Answer

A)  Gamma technique. 
B)  Delphi technique. 
C)  checklist approach. 
D)  inspection visits. 
A)  Gamma technique. 
B)  Delphi technique. 
C)  checklist approach. 
D)  inspection visits.

Question 6

Country risk can affect an MNC's cash flows but cannot affect its cost of capital.

Accepted Answer

A) True 
 B)False

Question 7

Eurenasia is a country that has frequently been assigned low macro-assessment ratings of country risk in the recent past due to its tendency to war with neighboring nations.MNC A is considering the establishment of a subsidiary to manufacture personal computers,while MNC B is considering the establishment of a subsidiary to manufacture tanks.Which of the two MNCs is likely to be less affected by the low macro-assessment

Accepted Answer

A)  MNC A. 
B)  MNC B. 
C)  both will be equally affected, since the macroassessment does not vary. 
D)  none of the above 
A)  MNC A. 
B)  MNC B. 
C)  both will be equally affected, since the macroassessment does not vary. 
D)  none of the above

Question 8

According to the text,the most appropriate method of incorporating country risk into capital budgeting analysis is to:

Accepted Answer

A)  compare each form of a country risk rating to a benchmark level. 
B)  estimate the effect of each form of country risk on cash flows. 
C)  estimate the effect of each form of country risk on the income statement and balance sheet. 
D)  adjust the discount rate to reflect the level of country risk using the conventional adjustment formula that is used by virtually all MNCs. 
A)  compare each form of a country risk rating to a benchmark level. 
B)  estimate the effect of each form of country risk on cash flows. 
C)  estimate the effect of each form of country risk on the income statement and balance sheet. 
D)  adjust the discount rate to reflect the level of country risk using the conventional adjustment formula that is used by virtually all MNCs.

Question 9

The degree to which foreign MNCs were affected by the Asian crisis suggests that country risk analysts did not detect some of the potential problems in these countries.

Accepted Answer

A) True 
 B)False

Question 10

According to the text,country risk analysis has:

Accepted Answer

A)  almost always detected problems before they occur. 
B)  been effectively used in place of capital budgeting to determine whether a project should be accepted. 
C)  been perfected as a result of the development of discrim inant analysis. 
D)  none of the above 
A)  almost always detected problems before they occur. 
B)  been effectively used in place of capital budgeting to determine whether a project should be accepted. 
C)  been perfected as a result of the development of discrim inant analysis. 
D)  none of the above

Question 11

When a country's currency is inconvertible,the earnings generated by a subsidiary in that country cannot be remitted to the parent through currency conversion.

Accepted Answer

A) True 
 B)False

Question 12

Country risk assessment should be used when:

Accepted Answer

A)  determining whether to establish a subsidiary in a foreign country. 
B)  determining whether to continue business in a foreign country. 
C)  A and B 
D)  none of the above 
A)  determining whether to establish a subsidiary in a foreign country. 
B)  determining whether to continue business in a foreign country. 
C)  A and B 
D)  none of the above

Question 13

The ______________ involves the collection of independent opinions on country risk without group discussion by the assessors who provide these opinions.

Accepted Answer

A)  checklist approach 
B)  discriminant analysis 
C)  regression analysis 
D)  Delphi technique 
A)  checklist approach 
B)  discriminant analysis 
C)  regression analysis 
D)  Delphi technique

Question 14

The primary purpose of country risk analysis when applied to capital budgeting is usually to:

Accepted Answer

A)  measure the effect of country risk on sales. 
B)  measure the effect of country risk on cash flows. 
C)  measure the effect of country risk on the consolidated balance sheet. 
D)  measure the effect of country risk on the consolidated income statement. 
A)  measure the effect of country risk on sales. 
B)  measure the effect of country risk on cash flows. 
C)  measure the effect of country risk on the consolidated balance sheet. 
D)  measure the effect of country risk on the consolidated income statement.

Question 15

A micro assessment of country risk:

Accepted Answer

A)  is adjusted for the particular business of the firm involved. 
B)  excludes all aspects relevant to a particular firm or project. 
C)  A and B 
D)  none of the above 
A)  is adjusted for the particular business of the firm involved. 
B)  excludes all aspects relevant to a particular firm or project. 
C)  A and B 
D)  none of the above

Question 16

If a foreign country follows the "Purchase Homemade Products" philosophy,the least effective strategy would be for a U.S.firm to:

Accepted Answer

A)  use a licensing arrangement with a local firm in that country. 
B)  enter into a joint venture in that country. 
C)  develop a subsidiary (under the U.S. name) that manufac tures and sells products in that country. 
D)  develop a subsidiary (under the U.S. name) that manufac tures products in that country and exports them to border countries. 
A)  use a licensing arrangement with a local firm in that country. 
B)  enter into a joint venture in that country. 
C)  develop a subsidiary (under the U.S. name) that manufac tures and sells products in that country. 
D)  develop a subsidiary (under the U.S. name) that manufac tures products in that country and exports them to border countries.

Question 17

MNCs can purchase insurance to cover the risk of expropriation.Which of the following is not a source of this type of insurance

Accepted Answer

A)  the World Bank. 
B)  the Overseas Private Investment Corporation (OPI
C) . 
C)  the International Monetary Fund (IMF). 
D)  all of the above are sources for insurance against expropriation. 
A)  the World Bank. 
B)  the Overseas Private Investment Corporation (OPI
C) . 
C)  the International Monetary Fund (IMF). 
D)  all of the above are sources for insurance against expropriation.

Question 18

_________ involve(s)the collection of independent opinions on country risk without group discussion by the assessors who provide these opinions.

Accepted Answer

A)  The checklist approach 
B)  The Delphi technique 
C)  Quantitative analysis 
D)  Inspection visits 
A)  The checklist approach 
B)  The Delphi technique 
C)  Quantitative analysis 
D)  Inspection visits

Question 19

The Multilateral Investment Guarantee Agency can provide MNCs implementing direct foreign investment in less developed countries with:

Accepted Answer

A)  insurance that covers losses on multilateral netting procedures. 
B)  exchange rate risk insurance. 
C)  political risk insurance. 
D)  guarantees that MNCs will receive the same taxation treatment by the host government as local firms. 
E)  guarantees of lines of credit provided by the World Bank if the MNC experiences liquidity problems. 
A)  insurance that covers losses on multilateral netting procedures. 
B)  exchange rate risk insurance. 
C)  political risk insurance. 
D)  guarantees that MNCs will receive the same taxation treatment by the host government as local firms. 
E)  guarantees of lines of credit provided by the World Bank if the MNC experiences liquidity problems.

Question 20

Which of the following is not a strategy that could be used by an MNC to reduce its exposure to a host government takeover

Accepted Answer

A)  attempt to recover cash flows from a foreign investment as quickly as possible. 
B)  rely on unique supplies and/or technology. 
C)  hire local labor. 
D)  borrow local funds. 
E)  all of the above are strategies to reduce an MNC's exposure to a host government takeover. 
A)  attempt to recover cash flows from a foreign investment as quickly as possible. 
B)  rely on unique supplies and/or technology. 
C)  hire local labor. 
D)  borrow local funds. 
E)  all of the above are strategies to reduce an MNC's exposure to a host government takeover.

A micro-assessment of country risk involves consideration of all variables that affect country risk except for those unique to a particular firm or industry.

___________ is not a political risk factor.

As a result of the 2003 war in Iraq,some MNCs feared that oil prices would and that U.S.inflation and interest rates would _.

A __ currency may the volume of products imported by the country and therefore reduce the country's production and national income.

Which of the following is not a technique to assess country risk

Country risk can affect an MNC's cash flows but cannot affect its cost of capital.

According to the text,the most appropriate method of incorporating country risk into capital budgeting analysis is to:

The degree to which foreign MNCs were affected by the Asian crisis suggests that country risk analysts did not detect some of the potential problems in these countries.

According to the text,country risk analysis has:

When a country's currency is inconvertible,the earnings generated by a subsidiary in that country cannot be remitted to the parent through currency conversion.

Country risk assessment should be used when:

The ______________ involves the collection of independent opinions on country risk without group discussion by the assessors who provide these opinions.

The primary purpose of country risk analysis when applied to capital budgeting is usually to:

A micro assessment of country risk:

If a foreign country follows the "Purchase Homemade Products" philosophy,the least effective strategy would be for a U.S.firm to:

MNCs can purchase insurance to cover the risk of expropriation.Which of the following is not a source of this type of insurance

_________ involve(s)the collection of independent opinions on country risk without group discussion by the assessors who provide these opinions.

The Multilateral Investment Guarantee Agency can provide MNCs implementing direct foreign investment in less developed countries with:

Which of the following is not a strategy that could be used by an MNC to reduce its exposure to a host government takeover

Multinational Financial Management: An Overview

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation,Interest Rates,and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

Multinational Restructuring

Multinational Cost of Capital and Capital Structure

Long-Term Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Exam 16: Country Risk Analysis

A micro-assessment of country risk involves consideration of all variables that affect country risk except for those unique to a particular firm or industry.

___________ is not a political risk factor.

As a result of the 2003 war in Iraq,some MNCs feared that oil prices would ______ and that U.S.inflation and interest rates would _______.

A __________ currency may ________ the volume of products imported by the country and therefore reduce the country's production and national income.

Which of the following is not a technique to assess country risk

Country risk can affect an MNC's cash flows but cannot affect its cost of capital.

According to the text,the most appropriate method of incorporating country risk into capital budgeting analysis is to:

The degree to which foreign MNCs were affected by the Asian crisis suggests that country risk analysts did not detect some of the potential problems in these countries.

According to the text,country risk analysis has:

When a country's currency is inconvertible,the earnings generated by a subsidiary in that country cannot be remitted to the parent through currency conversion.

Country risk assessment should be used when:

The ______________ involves the collection of independent opinions on country risk without group discussion by the assessors who provide these opinions.

The primary purpose of country risk analysis when applied to capital budgeting is usually to:

A micro assessment of country risk:

If a foreign country follows the "Purchase Homemade Products" philosophy,the least effective strategy would be for a U.S.firm to:

MNCs can purchase insurance to cover the risk of expropriation.Which of the following is not a source of this type of insurance

_________ involve(s)the collection of independent opinions on country risk without group discussion by the assessors who provide these opinions.

The Multilateral Investment Guarantee Agency can provide MNCs implementing direct foreign investment in less developed countries with:

Which of the following is not a strategy that could be used by an MNC to reduce its exposure to a host government takeover

Multinational Financial Management: An Overview

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation,Interest Rates,and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

Multinational Restructuring

Multinational Cost of Capital and Capital Structure

Long-Term Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

As a result of the 2003 war in Iraq,some MNCs feared that oil prices would and that U.S.inflation and interest rates would _.

A __ currency may the volume of products imported by the country and therefore reduce the country's production and national income.